This is a game changer. I am not using this label in its common, but incorrect, way to create dramatic tension. The decision by the Competition Tribunal will literally change the rules of the game for buying and selling homes because it changes the relationship between home sellers and real estate agents, between buyers and sellers, amongst agents and even affects people who are not active in the market.
This post unpacks this idea a bit, by using some familiar ideas and by looking at the US experience.
(I should declare an interest. As a researcher, I have hypotheses that I would like to test using Canadian data. Doing so would provide another way to contribute to the local community. In the past, I have received some data, by way of a local real estate board but it required a special decision. Some of that writing is probably my most highly cited work, sometimes without using my name or Robin Weibe’s name (my co-author). I sort of understand their reasons, but it is also true that nearly all of my empirical work uses data provided by friends in other countries.)
Almost anything which affects the distribution of information changes the rules of the game as most people see the game. For example, most people think that having more information gives them an advantage. Some people have an information advantage while others invest resources to acquire that advantage, such as learning in our classes. If the information environment changes so that everybody gets more information then the information advantage of some people has disappeared. And their behaviour would be forced to change. (This is another version of the example discussed in many economics class: one person can see better at a sports event if they stand up by themselves, but if everybody stands up then nobody has that advantage.)
The fact that the information asymmetry is known to be reduced would change behaviour during negotiations.
Information about the residential real estate market is much easier to access in the US. Their experience is interesting. Organizations like Zillow use massive amounts of raw data and write research reports on interesting topics, such as time on market, negative equity, or how the best time to list varies by state. (Zillow is pretty good about making data available for others to use in some format and about describing their methodology. This is exciting to academic researchers, since the members of GREG could do the same sort of things to see if the Canadian experience is similar, or not.)
These processes enhance the credibility of whatever wisdom they provide and that may be another way in which the decision of the Competition Tribunal would change the game of buying and selling real estate. Independent of the facts, people interpret the credibility of any facts that are reported. A fact reported by a motivated source would be interpreted differently than if the same fact had been reported by an independent source. Enhancing the credibility of the facts should make the market more transparent and inaccurate rumours should have a shorter half-life.
History shows that changes in information technology rarely make an industry disappear: travel agents and bricks-and-mortar retailers exist decades after they were predicted to vanish. Intermediaries, and the value which they add, adapt to market forces.
This post has noted how the decision will change the rules of the game. The Toronto Real Estate Board, which provides a lot of relevant information to the public, defended its actions. Not all of their reasons can be summarized by “We are an information monopolist and we want to protect our monopoly position.” So, I am sure that there will be more to say.